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Stream/Area:
-
Subject:
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Paper ID:
IJSREM66373
Volume:
10 |
7 |
Jul 2026
Pages:
1-15
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
Department of Economics
Ranchi University, Ranchi
Department of Economics
Ranchi University, Ranchi
Foreign Direct Investment (FDI) has emerged as one of the most significant sources of capital formation and economic development in emerging economies such as India. The relationship between FDI and macroeconomic variables is dynamic and often characterized by feedback effects. This study investigates the causal relationship between Foreign Direct Investment (FDI) and selected macroeconomic variables, namely Gross Domestic Product (GDP), Gross Domestic Savings (GDS), Gross Fixed Capital Formation (GFCF), Exports (EXP), Imports (IMP), Gross National Income (GNI), Net National Income (NNI), and Per Capita Income (PCI), using annual time-series data for India. The study employs the Granger causality framework after testing the stationarity and long-run equilibrium relationship among the variables. The empirical findings reveal both bidirectional and unidirectional causal relationships, suggesting that macroeconomic fundamentals significantly influence FDI inflows while FDI also contributes to economic growth.
KEYWORDS
The study concludes that the relationship between FDI and macroeconomic variables in India is characterized by both feedback and one-way causal mechanisms. While GDP and exports maintain a mutually reinforcing relationship with FDI, domestic savings, capital formation, national income, imports, and per capita income primarily act as determinants of foreign investment inflows. Policymakers should therefore focus on strengthening domestic macroeconomic fundamentals to attract stable and sustainable FDI, which, in turn, contributes to long-term economic growth and development
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Publication Date
7/28/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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The authors declare no conflict of interest related to this research work.
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